The Bottom Line

Bernice Elizabeth Green
So, you’ve got money in the bank, and you’re not sure it’s safe? Or you’ve got money in a bank, and you learned the bank is closing?
To all who have their funds in an FDIC-insured bank, and your stash is less than a certain amount in an account, you’re fine. To all others, the bottom line is: you may not be.
The FDIC is an independent agency of the United States government. The role of the FDIC is to protect the money people deposit in banks and savings associations. Further, unlike other insurances, there’s no need to buy deposit insurance on the account. The bank’s FDIC insurance automatically applies to any deposit account you open at an FDIC-insured bank. Can a depositor count on this arrangement and process during banking crises? FDIC banks on its 90-year history of success since they first came into existence. The government agency was created during the height of the Great Depression in 1933 in response to the thousands of bank failures that occurred during that time.

“The truth is,” says FDIC, “ the likelihood of losing your money is extremely small as long as an FDIC-insured institution holds it. Since 1933, no one {qualified account holder} has lost money due to a bank failure.”
Here’s how it works: first, under FDIC, your balance is covered up to $250,000 for each account. When a bank fails, FDIC is ready with a “safety” for the failing institution’s customers. It quickly moves into action to sell the bank’s assets to another stronger, healthier FDIC-insured bank. As the receiver in this arrangement, FDIC has the power to transfer your money to the fitter bank. It must, and it does. So that you will have a new account in a different bank where your funds are safe.
Investments like stocks, mutual funds, bonds, and life insurance policies are not covered by FDIC, even if these investments are bought at an FDIC-insured bank. Important to take note of all of this. The FDIC covers up to $250,000 per depositor per account; that’s $250,000 individually. Or $500,000 with a joint account holder.

And it’s reported that FDIC “usually” pays insurance within a few days after a bank closing, and sometimes as fast as the next business day.
Also, of note, the FDIC says it usually “has staff on-site the day a bank fails to identify people who have insured money in the bank.”
(Note to readers: A March 13 FDIC media announcement details how the agency acted “to protect all depositors of the former Silicon Valley Bank in Santa Clara, California.” Visit: http://www.fdic.gov/news/press-releases/2023/pr23019.htm)